Industry confident of driving costs below £100/MWh on the back of long-term market certainty

A report published today has provided strong evidence that the cost of energy from offshore wind continued to fall through 2015 and remains on track to deliver the target of £100/MWh by 2020. It also identifies forthcoming announcements on timing and scale of future Contracts for Difference (CfD) auctions and long term capacity requirements as key enablers of further cost reduction.

The second annual Cost Reduction Monitoring Framework (CRMF) report, delivered by the Offshore Renewable Energy Catapult on behalf of the Offshore Wind Programme Board, shows that investment in turbine technology has delivered significant cost benefits, but that further reduction will need to come from the innovations in ‘balance of plant’, such as foundations, cables and substations.

Investment in research and development and manufacturing industrialisation to deliver such improvements, the report warns, will only come with greater visibility of future rates of deployment and market size as Government sets out details of contracts for new offshore wind farms.

The report is released at the same time as the UK Parliament reviews the 5th Carbon Budget of the Committee on Climate Change, which projects that offshore wind costs will be below new nuclear and new gas plant by 2025.

Energy Minister, Andrea Leadsom commented:

“The UK offshore wind industry continues to go from strength to strength and I’m delighted to see further evidence that costs are continuing to come down. Reductions in cost will mean better value for hard working bill payers, and are essential if this industry is to thrive".

Benj Sykes, industry co-chair of the Offshore Wind Industry Council, said “We have continued to see excellent progress in reducing the cost of clean energy from offshore wind. The industry is fast-tracking adoption of new innovation in turbine design and in project operations, putting us ahead of the curve in efforts to bring down the cost of offshore wind. We are very confident that we cannot only reach our £100/MWh milestone, but go beyond this to become fully cost competitive with other generation technologies.

"We welcome the UK Government’s continued strong support for the offshore wind sector, recognising it as a major contributor to the nation’s future energy mix. The report shows that further clarity on the timing and volume of future Contract for Difference auctions, and the longer term capacity requirements out to 2030 and beyond, is essential for the industry to galvanise the activity that will deliver further innovation and cost reductions”.

Andrew Jamieson, CEO of the Offshore Renewable Energy Catapult, said “The UK’s world leading offshore wind industry can be proud that it is meeting its commitment to deliver more affordable, low carbon energy.

"This report sets out a clear pathway to further cost reduction through technology innovation and collaboration to ensure that Britain continues to reap both economic and environmental benefits”.

Jonathan Cole, Chair of the Offshore Wind Programme Board said: “Offshore wind is delivering jobs and economic benefit to the UK right now. This report shows that consumers and Government can be confident that the cost of offshore wind will continue to reduce and that offshore wind is the ideal way to produce the large quantities of clean, reliable energy that the UK needs”.

Of the 13 cost reduction indicators in the report, all but one are ahead or on target with the milestone set for 2015. The only measure that is behind target is growth and scale. Findings show that industry has already adopted innovations that were not previously expected to significantly drive cost reduction until 2017, particularly in the areas of turbine design and project maintenance.

The report also assessed the degree of confidence that the industry has in delivering further cost savings. It found high confidence of delivery in eight of the indicators, with medium confidence in a further three, to achieve the milestone of £100/MWh in 2020.

Such confidence has brought a commitment from Government to work with industry on agreeing a new, ambitious cost reduction target for the 2020s.

Notes:

The Offshore Wind Programme Board is a joint industry and government initiative to find and implement solutions to barriers which could impede offshore wind in the UK.

ORE Catapult was established in 2013 by the UK Government and is one of a network of Catapults set up by Innovate UK in high growth industries. It is the UK’s flagship technology innovation and research centre for offshore wind, wave and tidal energy and helps to reduce the cost of offshore renewable energy, supporting the growth of the industry and creating UK benefit.